The dollar held little changed on Friday but stayed on track for a weekly gain against major peers, with uncertainty over a possible Iran peace deal keeping demand for the safe-haven currency elevated ahead of the U.S. payrolls report. The yen extended its rebound from this week's currency intervention, while Gulf tensions and firmer oil prices added further support to the greenback.
The dollar was little changed on Friday but stayed on track for a weekly gain against major peers, as uncertainty over a possible Iran peace deal kept demand for the safe-haven currency elevated ahead of the closely watched U.S. monthly payrolls report. The report could offer fresh clues on the Federal Reserve's policy path as markets weigh the chance of another interest rate hike.
Payrolls data set to test the dollar's gain
U.S. nonfarm payrolls are forecast to have risen by 80,000 jobs last month, after a 57,000 increase in June, according to a Reuters survey of economists. The unemployment rate is expected to hold steady at 4.2%.
According to Nick Rees, head of macro research at Monex Europe: "It is all about payrolls today". He noted there could be a modest dollar selloff if the report comes in softer than expected.
The dollar index, which tracks the currency against six major peers, was a touch lower at 99.926 but up just over 0.1% for the week, after a 1.6% drop the previous week.
Yen extends rebound from this week's intervention
The greenback traded about 0.1% lower at 158.29 yen, after gaining 0.4% on Thursday. That kept the dollar-yen pair on course to rise almost 0.5% this week as it recovers from a joint Japan-U.S. intervention that had driven it from near a four-decade high above 163 to a 13-week low of 155.20 on Monday.
Against the euro, the dollar held steady at $1.1528, while sterling slipped 0.13% to $1.3434.
Gulf tensions keep haven demand alive
Saudi Arabia expects coordinated attacks by Iraqi militias from the north and Yemen's Houthis from the south, under the supervision of Iran's Revolutionary Guards, a senior Saudi official said. At the same time, investors are weighing signs that Gulf states and Iran are moving closer to a temporary agreement to reopen the Strait of Hormuz and pave the way for broader talks aimed at ending the war. Brent crude fell 0.7% to $81.9 a barrel.
Inflation concerns have weighed on U.S. Treasuries, pushing yields higher.
Fed rate path keeps dollar supported
Commonwealth Bank of Australia economist Kristina Clifton said the dollar drew support from higher oil prices after a deal to reopen the strait appeared further away than hoped. She and other analysts pointed to a Financial Times report citing sources close to Fed Chair Kevin Warsh that raised the possibility of a September rate hike depending on incoming data. Clifton said she expects the Fed to wait until December before starting a modest tightening cycle. A divided Federal Reserve left rates unchanged last month, though Warsh said he was committed to bringing down inflation.
Source: Economy News
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